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The periodic table

I read with interest, and some dismay, Sam Agini’s great piece in Financial News yesterday about Marcus Ferber writing to ESMA be-moaning periodic auctions. Perhaps the most asinine comment attributed to Mr Ferber is that some such mechanisms are a “blatant attempt to undermine the Mifid II provisions aiming at having a larger share of trading in the light”. It is... Read More

ESMA’s first Heisenberg moment

Anyone who has watched the cult TV series Breaking Bad knows that Heisenberg was the clandestine alias adopted by the show’s chief protagonist, Walt White. The ‘original’ Heisenberg was, of course, the brilliant German theoretical physicist who developed his famous Uncertainty Principle. Simply stated it says that one can know either the position of a particle or its... Read More

Why you’ll never be ready for MiFID II

I attended Institutional Investor’s excellent Trader Forum in Barcelona last week. Basically it brings together the senior executives from the buy-side, the sell-side, venues and technology firms to debate and make sense of our industry. Naturally much of the conversation revolved around the new conditional dark pool venues, periodic auctions and Systematic Internalisers that... Read More

The shape of block liquidity

Now we are all back from summer hols it seems like everyone is getting ready for the final push that will propel our industry into its post-MiFID II future. Much still needs to be done, not least of which by ESMA in telling us what all the rules actually mean and what game we are supposed to play as a result of them. This is particularly true in the case of block liquidity which... Read More

Be careful what you wish for

Those of us who remember the good old days will recall the industry debate as to how much dark liquidity was really in existence. In one corner were the exchanges who, through FESE, claimed that the amount of malevolent dark trading going on was unacceptably high. In response the brokers claimed through their trade body, AFME, that actually it was pretty low. And, as we all know,... Read More

Thomas in Blockland

Thomas the crossing network wasn’t happy. For years he had enjoyed helping his friends buy and sell things amongst themselves. Sometimes he would even step in directly and agree to buy or sell something himself, especially if there was an awful lot of it. But now he had a tricky choice to make. The ruler of the land, The Regulator, had been convinced by the Exchanges that... Read More

Mince pies and MiFID

I spent the holidays diligently researching the best brand of mince pies in order to settle a pre-Christmas debate here at Fidessa Towers. Naturally my criteria included a number of factors including (but not just) price and, perhaps surprisingly, the winner was Tesco’s in-house bakery. Back at work, my attention turned to my other favourite M word – MiFID II – as... Read More

Central Risk Books – the new black for capital markets

I first came across the term “central risk book” at the excellent International Trader Forum event in Rome a couple of weeks back. It seems like it’s the banks’ answer to the dark pool caps that will be upon us in a little over a year. As of January 2018 banks won’t be able to operate their own dark pools in their current form and it seems that the preferred... Read More

One million Fragulators can’t be wrong

I don’t often write about fragmentation these days, but I noticed this morning that our frag counter surpassed the 1 million mark. To be honest I was planning to write something later in the week, but thanks to a certain university in Italy that slurped its way through 15,000 fragulations at the weekend, I am a bit off the pace. I have to admit that when we first launched the... Read More

BATS auctions off the block problem

There has a been a lot of talk about how to trade blocks that are smaller than the LIS waiver but that are still too big to go to regular lit markets. The debate has been ratcheted up by the 4 and 8% dark pool caps that are part of the MiFID II spectre looming above us all. One approach, of course, is to chop your block into smaller pieces with an algo but this is becoming increasingly... Read More

FragPro all wrapped up for Christmas

Following on from my last blog on the subject, the guys at Fidessa Labs have now made the latest version of the Fragulator available. Despite its name FragPro is still free, and yet it contains a bunch of cool new features. These include the ability to view stocks or indices by order book or venue owner (e.g. LSE Group including Turquoise, or all Euronext venues), track dark pool... Read More

Last minute shopping in Europe

Imagine you are doing the last of your Christmas shopping – all that’s left to get is a large chunk of your favourite stock. Because you generally buy in bulk, you know to avoid the brightly lit but expensive retail stores, and instead shop at one of the big wholesalers. But, there’s a problem. Somebody has passed a law capping the amount that any one of those stores can... Read More

Back in Block

On the way in this morning, I was listening to my favourite AC/DC album and thinking about the challenges of block trading. The problem is well known – a combination of multi-market trading, algos and DMA have created a vicious cycle that continues to shrink order sizes. This is compounded by regulators who insist that lit is better than dark and that the best way to demonstrate... Read More

The Twilight Zone

I came across the term ‘Twilight Pool’ for the first time this week. The basic idea is that it is essentially a dark pool that lights up certain pieces of information, or at certain times, in order to provide users with some idea of what is or isn’t lurking there. The advantage is that it enables participants to see if the type of liquidity they’re seeking (either... Read More

Dumb and (even) dumberer

I wrote earlier this week about Financial Transaction Taxes and why the regulators’ ‘rationale’ for these taxes is either misplaced or disingenuous. An even more extreme example, however, was pointed out to me the other day concerning that other controversial topic, dark pool trading. As part of our regular analysis we pointed out that European dark pool trading had... Read More

The dark gets darker

In the past 6 months, European dark pool trading has grown by 45% compared to the same period last year, and yet the universe of stocks traded in the dark has only grown by 2%. Read the full analysis in our latest report.  Read More

Where’s my TV remote?

The recently proposed cap on European dark trading has caused quite a stir. It also illustrates how MiFID II policy-making has descended into almost Eurovision song contest levels of farce. The basic idea is to put a cap (currently proposed at 8%) on the level of trading that occurs away from lit markets. The rationale for this is to protect the regulator’s precious price... Read More

Dark matter 2

Welcome to the second issue of our European Dark Trading Analysis. In this report we provide a comparative performance analysis for the major European dark pools, together with a useful at-a-glance summary of the regulatory framework across the globe. Thanks to everyone for their suggestions so far and please keep them coming – just email the team. Download your copy here.  Read More

Dark matter

In cosmology, dark matter is a type of matter that the boffins reckon accounts for a large part of the total mass of the universe. It cannot be seen and neither emits nor absorbs light. And yet it is estimated to account for over 80% of the total universe – so, pretty important then. In European equities trading the rise of dark pools has created a similar enigma. Everybody knows... Read More

I’m a mid-sized broker – get me out of here!

On the train this morning, I was browsing through London’s Metro newspaper to see who the latest ‘victims’ in The X Factor, Strictly, I’m a Celebrity etc, were (incidentally, it’s probably the people that actually watch these programs, but that’s another story). I was a bit shocked, therefore, to come across a double page spread examining dark pool trading. I... Read More

Alternative venues play waiting game in Japan

Just back from an interesting week in Japan where I was presenting at the annual GMAC conference, Japan International Banking & Securities Systems Forum. The impact of Japan’s alternative venues (known as PTSs) was a particular area of discussion, especially now that Chi-X has set up in Australia and with Korea looking to introduce a multi-market structure too. It’s been... Read More

Australia joins the global fragmentation movement

I was a guest last week to mark the opening of the Australian Liquidity Centre which is not, as you might think, the latest trendy Sydney nightspot. Instead it’s the name chosen by ASX for its impressive new co-location facility and represents the exchange’s latest move to meet the imminent opening up of equities trading Down Under. The transfer of market supervision from... Read More

The Great Game

I was the guest of DnB NOR in Oslo earlier this week where I participated in their Nordic Market Structure and Best Execution Summit. The event was well attended and included a number of significant buy-side firms. One of the themes that emerged was that liquidity demand seems to be consolidating into a smaller number of large investment firms whilst, conversely, liquidity supply... Read More

Fragmentation Milanese style

I spent the first half of this week in Milan, as the guest of Assonime and Emittenti Titoli, debating trends in the European securities industry. What made the event especially interesting for me was that it brought together participants from both the trading community and those involved in issuing shares on capital markets. For those firms that are listed on public markets it seems... Read More

Brussels spouts!

It used to be okay when Brussels’ euro meddling was limited to the banalities of life, but the remarks attributed to Kay Swinburne (Conservative MEP for Wales) yesterday seem to show a dangerous misunderstanding of how European financial markets work. The concept that dark pools are “always bad” is naive on a number of levels. Firstly, the term ‘dark pools’... Read More

Aussie rules OK

The latest of our fragmentation forums landed in Sydney last week where around 150 industry executives got together to debate Australia’s future in the global fragmentation experiment. The event was well timed as the Australian Regulator, ASIC, published its long awaited consultation paper outlining its proposed new rules governing equities trading on the very same day. The... Read More

Can’t see the wood for the trees?

It is not always easy to get a clear understanding of what’s going on when confronted by large amounts of data. The usual solution to this is to step back in order to get some perspective and understand the bigger picture. The other approach is to zoom in on a small part of the detail and see if it is representative of the whole. Take a look at the FFI for Big Yellow Group,... Read More

Art of Darkness

Nice to see that SmartPool is really starting to move the dial in terms of its dark pool volume. Since January its volumes have grown to the point that it is now in third place behind Chi-Delta and the LSE’s own Turquoise. Lee Hodgkinson, CEO of SmartPool, pointed out that whilst European dark volumes are still relatively modest (around 5%) they are growing at a compound rate... Read More

A Shot in the Dark

This week saw the announcement that six brokers are going to publish their dark pool volumes in a bid to improve transparency of non-lit trading in Europe. The report is published by Markit and is available here. Whilst the six firms involved should be applauded for taking these first steps towards greater transparency, the announcement still leaves a few questions unanswered. Firstly,... Read More

Liquid Refreshment

Firstly, thanks to Olof Neiglick and the Burgundy team for hosting an enlightening seminar on the state of liquidity fragmentation in the Nordics earlier this week. The sessions included presentations from brokers, vendors and clearers and helped highlight a number of issues facing the broking community as a whole and particularly in terms of dealing with fragmented liquidity. The... Read More

Battle Stations

Had a couple of productive (and fun) days at TradeTech Europe last week. The Fidessa airship flying round the exhibition hall served as a good reminder to everyone that the switch by the LSE Group onto its spangly new Millennium Exchange platform is fast approaching. This new matching engine will also be powering the LSE’s own MTF, Turquoise, which will be going live ahead... Read More

The T Word

It was interesting to watch Andrew Bowley’s video interview on Finextra regarding the launch of Nomura’s dark pool – NX. It helped crystallise the love/hate relationship between dark pools and the T word – Transparency. Andrew Bowley made a good point about how the pursuit of MTF status for NX had been going on for a long time and wasn’t just a knee jerk reaction... Read More

Fragmentation Fever Goes East

Looks like 2010 is going to be a pretty interesting year in the battle for liquidity between the established exchanges and the more recently established MTFs and dark pools. It also looks like fragmentation fever is likely to spread eastward, too. This is being driven by a number of factors that include technology, regulation and commercial opportunism. The introduction this week... Read More

Happy Holidays

Now that everyone at Fidessa Towers is starting to wind down and prepare themselves for the Christmas break, I decided to look back at the predictions I made at the beginning of January 2009. As you can see from the table below, it looks like the FFI is a pretty good predictor of trends.   If the 2010 predictions are accurate you can expect the LSE’s market share in lit trading... Read More

Whose Liquidity Is it Anyway?

Two events this week crystallised the need for better pre- and post-trade information. Firstly, BATS joined ranks with Chi-X to question the LSE’s decision to set its market to auction mode during its recent outage. In a related white paper on the subject BATS also claims that “it is questionable whether the market was orderly on the LSE given publication of data which... Read More

Should I Stay or Should I Go?

Few can have missed the furore over the LSE outage yesterday. During the outage the MTFs made repeated attempts to convince the trading community that it should go and trade on them whilst the LSE was unavailable. The chart below, however, shows that they were pretty unsuccessful in this and that, instead, traders simply stayed away from the market altogether until trading resumed.... Read More

Monopolies Bad, MTFs are Good?

I was chatting with the guys at Fidessa Towers the other day about what constitutes the “right” business model for venues in the post MiFID environment.  It’s an interesting question, and one the European regulators seemed to completely ignore when they first introduced MiFID back in November 2007.  The evidence so far is uncertain.  MiFID has undoubtedly broken up the... Read More

Index Fragulation

Following a number of requests the boys in the Labs have now added the ability to fragulate entire indices, not just stocks. To do this you can either click the abacus icon next to each index on the main site or select them directly from the Fragulator™ page. This helps provide another dimension to understanding what’s really going on in Europe. I’ve been having an initial... Read More

Fragmentation Diversifies

It’s hard to miss the widening gulf in fragmentation between the London Stock Exchange and the other primary markets. The gap started to appear during the summer but seems to have been widening to the point that fragmentation on FTSE 100 stocks is now around 30% higher than in France or Germany. NYSE Euronext and Deutsche Börse will doubtless be monitoring the London situation... Read More

Fragulation Fever

Firstly thanks to everyone who has emailed me with such positive responses to the Fragulator. Thousands of fragulations have taken place on the site since Friday and it’s great to know that so many of you are finding it useful. We’ve had all sorts of interesting feedback, especially in terms of the classifications we have chosen and the different levels of reporting... Read More

Turquoise, the LSE and the Fragulator

I was wondering the other day whether we might run out of space on the web site soon as more and more venues are created. Well, the good news is that Xavier Rolet and Eli Lederman may have helped us solve that problem (LSE in talks to buy Turquoise). Assuming that the proposed acquisition does indeed go ahead, it will be interesting to see how this will affect the trading landscape.... Read More

Dark Forces

At the beginning of September, BATS Europe announced further extensions to its inverted pricing model to include FTSE 100 stocks. At the same time NASDAQ OMX Europe extended its aggressive rebates, too. The LSE’s approach to these pricing pressures was to abandon its own maker taker price list and revert to its wholesale discount model. This was widely seen as favouring the big... Read More

A Shot in the Dark

Nice to see that BATS Europe has announced that it, too, is going to launch a dark pool service. While not too surprising, it is interesting to note that they will be offering a maker taker pricing model as this will be sure to extend the current price war into the dark arena as well. BATS joins a long list including Chi-X, Turquoise, NYFIX Euro Millennium, SmartPool, Pipeline,... Read More

Having your cake and eating it

The FFI clearly shows that fragmentation is steadily rising as smart routers continue to spread trading volume across different venues. Looking at last week’s data, though, I couldn’t find a single venue (primary or MTF) that wasn’t showing a decline in its overall volume for the week. Obviously the bank holiday and half term break affected the figures but this still highlights... Read More

The Broker Dealer Conundrum

Jeremy Grant’s article in the FT today, “Dark pools start evolving into brokerage operations”, points to something that is starting to be talked about with increasing vigour. This is the simple fact that, in the post-MiFID landscape, the roles of exchanges/MTFs and the broker dealers are starting to become almost interchangeable. The announcement that Turquoise has received... Read More

Last Mover Advantage

Last week was a good week for fragmentation. BATS continues to build on the impressive start it made last year and it was great to see that volumes at Turquoise are starting to get back to the levels (over 6% of the FTSE 100) it enjoyed before the end of the market making obligations. The last 6 weeks have also seen impressive growth in volumes at Chi-X. The fact that all of the... Read More

The Future Shape of Trading

Looking at the FFI today, I was intrigued to see that fragmentation in Paris and Amsterdam went down last week (by nearly 10%) compared to a small increase in London and a relatively unchanged week in Frankfurt. Looking at the data more closely, the difference seems to be that Chi-X and BATS did less volume in Paris and Amsterdam than they have in previous weeks. This is even more... Read More

The Colour of Money

It was a record day yesterday here at Fidessa Towers as 1000s of people logged on to look at the stats on Turquoise now that the liquidity agreements with its institutional backers have expired. The drop off in volumes is significant but it is worth digging a little deeper into the true cause and impact. Firstly, as Eli Lederman (Turquoise’s CEO) points out “it was an... Read More

Trading Places

Few can have missed the news that Peter Randall will be leaving Chi-X. Whatever the reasons for his departure, Peter has proven that it really is possible to break the mould in our industry and he should be credited with this achievement. He has always been able to talk about MiFID and fragmentation in an entertaining way and backs up his colourful analogies with hard statistics.... Read More

A View from Turquoise

Thanks to Eli Lederman, CEO of Turquoise, for responding to my recent entry (The Big Bang Theory). With his permission I have included his comments below: “A little confused…Turquoise cut its fees because we can: we operate a diversified (and diversifying) business with an integrated lit and dark market. Seems to be what, in the next paragraph, you characterize as “the... Read More

The Big Bang Theory

A number of separate announcements caught my eye this week. The first was the announcement that Turquoise is to cut its trading fees (Turquoise announces enhanced rebate programme). Of course, the promise of lower fees was the poster child for MTFs when they launched last year, but I wonder what the “right” price for providing a market to trade shares should be. NASDAQ OMX Europe... Read More

Turquoise and the Tale of Tape

Congratulations to Eli and Turquoise on concluding their recent round of fund raising successfully (as reported by Jeremy Grant in today’s FT). The fact that the money was raised from existing shareholders is testimony to these firms’ determination to keep the pressure on the traditional venues and, at the same time, have some skin in the game as the new, post MiFID landscape... Read More

Welcome Back!

First day back at school today – thought it might be a good (dangerous?) idea to try and make some predictions about what we will see in the world of fragmentation through 2009. In the six months since we have been putting the numbers together, the FFI on the FTSE 100 has risen by 0.8 on the CAC 40 and by 0.3 on the DAX indices. Applying a strictly linear extrapolation of... Read More

The price is right

I was reading about the ‘MTF effect’ on Finextra this morning (see http://www.finextra.com/fullstory.asp?id=19416). This article echoed some of the themes from the recent TradeTech Liquidity event about the price improvements that can be enjoyed in the new MTF world. I expect that SOR vendors will soon start waving around their own statistics that show how their brand... Read More

FFI extends into the 250

Thanks to the Xmas elves at Fidessa Labs working overtime, we now include coverage of the FTSE 250 which many of you have requested via email. Having had a quick look this morning it’s interesting to see that Chi-X is making a big dent in the 250 (as well as the FTSE 100) and that, whilst their numbers are relatively low, BATS and Nasdaq OMX are beating Turquoise into 4th... Read More

The plot thickens

Interesting day yesterday in the ever-changing world of fragmentation. During the MTF v Traditional Exchanges debate at TradeTech Liquidity it seemed like there were two strategies emerging. The big primary markets are trying to leverage their distribution and multi-asset capabilities whilst the smaller, more nimble, MTFs are looking to focus around specific areas of the European... Read More

Think I’ll do my Xmas shopping at PLUS Markets this year

Yesterday, while looking at the PLUS Markets website I noticed that they are now advertising mobile phones and coffee makers. (Check it out at http://www.plusmarketsgroup.com/PLUS_myplus.shtml). When I wrote yesterday that the trading landscape was still to undergo fundamental change I didn’t think that alternative venues would be diversifying into the household goods market... Read More

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